(Corrects company name in fifth paragraph to China Southern Power Grid)
* CLP to use internal cash and bank loan to fund the deal
* Castle Peak has total generation capacity of 6,908 MW
* CLP backed by wealthy Kadoorie family
HONG KONG, Nov 19 (Reuters) - Exxon Mobil Corp has agreed to sell its majority stakes in a Hong Kong utility and a power storage firm for a combined $3.4 billion, helping the U.S. oil major raise funds to plough back into its core operations.
Many integrated global oil companies have struggled to boost production, spending heavily on new projects in recent years. In the first nine months of this year, Exxon, the world's biggest oil firm by market value, spent $33 billion.
They are also keen to put cash in the pockets of investors through asset sales, share buybacks or dividends as analysts grumble about lagging stock prices.
Under the deal, CLP Holdings will assume control of Castle Peak Co Ltd, one of Hong Kong's main electricity providers, lifting its stake to 70 percent by buying half of Exxon's holding for HK$12 billion ($1.6 billion).
State-owned China Southern Power Grid will buy the other 30 percent held by Exxon but it did not disclose financial terms. A person close to the transaction told Reuters that CSG will also pay HK$12 billion.
CLP, which is backed by the wealthy Kadoorie family and has been providing electricity to Hong Kong for over 100 years, said the deal will help it better manage and coordinate its Hong Kong power generation and distribution business.
It also plans to buy Exxon's 51 percent stake in Hong Kong Pumped Storage Development Co for HK$2 billion.
Castle Peak Power Co Ltd owns three power stations in Hong Kong with a total power generation capacity of 6,908 megawatts, including a 4,108-MW coal-fired plant called Castle Peak and the 2,500-MW gas-fired Black Point power station.
The sale of stake comes after Exxon ran an auction to find a buyer for half its stake earlier this year. While the sale process elicited some interest from Japanese and Southeast Asian bidders, CLP was seen as the natural buyer given its 40 percent existing shareholding, people familiar with the matter said.
CLP and Power Assets Holdings Ltd, Hong Kong's other power supplier that is controlled by tycoon Li Ka-Shing, garner an annual return of 9.99 percent on net fixed assets until 2018 under a government programme.
Power Assets has announced plans to spin off its Hong Kong electricity business through an Hong Kong IPO, which could raise up to $5 billion.
CLP will use internal resources and a HK$10 billion loan facility from HSBC Plc to fund the acquisition.
Castle Peak's profit rose 2.7 percent to HK$3.1 billion for year ended Dec. 31, 2012, when it had net assets of HK$540 million.
CLP said it was advised by Evercore Partners and HSBC while CSG said it was advised by Morgan Stanley and China International Capital Corp. Barclays Plc advised Exxon, a person familiar with the matter said.
($1 = 7.7524 Hong Kong dollars)
(Editing by Edwina Gibbs)